GST compliance costs SMEs $13.7 billion a year

Complying with Australia’s GST rules is costing small business more
than $13.7 billion a year, according to new research released today by
Australia’s leading accounting software provider, MYOB.

Based on a survey of 1026 SME owners and managers, the research
reveals the true cost of the GST burden on the men and women running
small and micro-enterprises across the country.

The survey found that a SME spends an average of 84.1 hours a year
to collect the tax on behalf of the Australian Government - or more
than two full working weeks a year (based on the standard 38 hour
working week).

This equates to $6778 a year for each of the estimated 2.02 million
SMEs and non-employing business in Australia – or $13.7 billion a year
across all SME (based on the hourly rates supplied by the survey respondents).

MYOB also identified where the GST burden falls within a business. Of
the 84.1 annual hours of work each company commits to the GST, 64
hours are performed by the owners and managers.

MYOB CEO Tim Reed said the government needs to better understand the
impact the GST has on the running of a small enterprise.

“If Australia is to have a debate on the GST then let’s start with
the way it is collected and reported. Let’s look at ways to ease the
cost and burden on SMEs.”

“The GST represents two full weeks where the owner’s attention is
dragged away from the day to day running of their business. This is a
significant drain on the productivity and profitability of SMEs,” said
Mr Reed.

“If the Government’s focus is on improving Australia’s productivity
and reducing red-tape, then easing the burden of GST compliance should
be a priority,” Mr Reed said.

MYOB’S SOLUTION TO THE GST BURDEN

The survey found that the biggest problem for SMEs is the recording
of information needed by the ATO, which takes 78.2 hours a year on average.

Currently SME operators need to asses each transaction on an invoice
to determine if GST applies if the transaction is GST-free. They then
have to assign each of the GST-free transactions into one of eight
possible categories, based on the Australian Taxation Office’s (ATO)
GST-free codes.

The need to determine and assign codes has nothing to do with the
collection of GST revenue as it only relates to transactions that are
GST-free. The GST-free codes are used by the ATO to benchmark
industries for auditing.

Mr Reed called on the Australian Government to make a simple and
effective reform of the GST by abolishing the requirement to provide
additional information on GST-free transactions.

“We need to simplify the GST so that small business operators need
only determine if a transaction is one where GST applies or if it is GST-free.”

“The need to allocate a GST-free code to each transaction results in
uncertainty, confusion and compliance risk. It has nothing to do with
the GST the company is required to pay.”

“This reform would bring Australia in line with New Zealand where
there is no requirement to report additional details about GST-free
transactions, making it easier for small business to comply.”

“Australian businesses are spending twice as long on GST compliance
than businesses in New Zealand. A New Zealand SME needs 39 hours on
average to comply with the GST each year, compared to 84 hours by
Australian SMEs.

“Removing the requirement to report and classify every GST-free
transaction is a sensible and modest reform that could be achieved
through regulation, avoiding a more difficult political path of
negotiation through Parliament.”

“This is a smart reform that can be achieved now and will provide
much needed relief to Australia’s millions of small businesses,” Mr
Reed said.

About the MYOB Business Monitor

Established in 2004, the MYOB Business Monitor is a national survey
of small and medium business owners and managers, commissioned to
independent market research firm Colmar Brunton. The most recent study
ran in January and February 2014, surveying 1,032 Australian operators
from sole traders to mid-sized companies, representing the major
industry sectors. The Monitor researches business performance and
attitudes around areas such as profitability, cash flow, pipeline
work, technology usage and government. Note: the weighting of MYOB
client and non-client respondents is reflective of overall market proportions.

About MYOB

Established in 1991, MYOB is Australia’s leading accounting software
provider. It makes life easier for approx. 1.2 million businesses
across Australia and New Zealand by simplifying accounting, payroll,
tax, CRM, websites, job costing, practice management, inventory,
mobile payments and more. MYOB also provides ongoing client support
via many channels including a network of over 40,000 accountants,
bookkeepers and other consultants. It is committed to ongoing
innovation, particularly in cloud computing solutions, and spends more
than AU$35 million annually on research and development. For more
information, visit myob.com.au.

For MYOB product information, research results, business tips,
discussions, client service and more visit the MYOB website, or its
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